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SecureKloud TechQ3 FY20

SecureKloud Tech

Q3 FY20 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Full analysis

Revenue guidance

Category 3
  • →Revenue expected to be stable over the next two quarters with accelerated growth beginning next financial year due to investments in sales and marketing.
  • →Anticipated 20% topline year-after-year growth over time, driven by recovery in hospital business and growth in platform offerings like DataEZ.
  • →Hospital business expected to return to pre-COVID levels within 1-2 quarters, contributing an increase of about Rs 10 Crores quarterly.
  • →Focus on recurring revenue models and multiyear platform deals to improve growth and valuation.
  • →Expansion into EMR implementation and AI-powered DocuRoute to drive future revenue streams.
  • →Offshore delivery model expansion planned to improve margins and cost efficiency, facilitating growth.
  • →IPO plans for Healthcare Triangle US subsidiary expected to enhance valuation and support growth capital.

Margin guidance

Category 1
  • →Revenue growth of 20% year-over-year expected over time, with hospital business recovering post-COVID (Page 18, 7).
  • →Gross margins currently at 36%; targeted increase to 50% over next 4-6 quarters by focusing on recurring revenue platforms and offshore delivery (Page 18).
  • →Long-term plan for DataEZ platform to generate 75% gross margins within 3-4 years, contributing to overall margin expansion (Page 18).
  • →EBITDA margin historical range was 30-35%; future margins expected to be lower if R&D capitalization ceases, but improvements anticipated via recurring revenues and cost optimization (Page 17, 18).
  • →Investment in sales and marketing to accelerate revenue growth starting next financial year (Page 7, 8).
  • →Recurring platform revenues to grow, enhancing profitability and valuation multiples (Page 17).
  • →Overall operating profits expected to improve with margin expansion and rising recurring revenue streams through platform growth and offshore efficiencies.

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Fundraise plans

Yes
- Healthcare Triangle (HTI), the US subsidiary of 8K Miles, is planning an IPO to raise approximately $20-25 million, anticipated before mid-next year (Page 8, 15). - The IPO proceeds will support growth in the US healthcare space over the next 2-3 years (Page 11). - There is investor permission to raise up to $50 million initially targeting $20-25 million through the IPO (Page 15). - Current debt stands at about Rs 138 Crores, primarily promoter debt; no new immediate debt plans stated, but the HTI IPO proceeds will help retire Indian loans by shifting billing from India to HTI (Page 11, 12). - No explicit mention of additional debt fundraising in the near term; focus appears to be on equity fundraising through the HTI IPO (Page 11). In summary, the main future fundraising effort is the planned $20-25 million IPO for Healthcare Triangle, aimed at equity capital for growth and debt retirement.

Order book

Yes
  • →The company plans to provide more clarity on the order pipeline in future investor communications.
  • →Currently, detailed order book or pending orders figures are not explicitly disclosed in the transcript.
  • →Suresh Venkatachari emphasized improved communication and transparency in future quarters regarding order pipeline.
  • →Investments in sales and marketing in both US and India are expected to accelerate new order inflow.
  • →The company is focusing on hospital business recovery and growth in Life Sciences and Pharma, likely impacting order book positively.
  • →DataEZ platform is generating recurring revenue backed by a $2 million/year managed services contract.
  • →Overall, they expect a stable revenue in the near term and accelerated revenue growth from the next financial year driven by platform and recurring business.

Capex plans

Yes
  • →Healthcare Triangle plans an IPO to raise around $20-25 million for growth in the US healthcare space.
  • →The IPO capital will support operational and future investment needs for the next 2-3 years.
  • →The company has made significant investments in product and platform development, including DataEZ and Cloud Art (IAM and multifactor authentication).
  • →Investments are focused on building recurring revenue models and platform-based offerings to improve margins.
  • →There is ongoing R&D investment alongside sales and marketing spends to support growth.
  • →The company aims to improve offshore delivery capabilities to enhance margins.
  • →Some future announcements on new technology, especially in security and blockchain platforms, are expected in the next quarters.
  • →No specific details on incremental capex amount but strategic investments in technology platforms and IPO fundraising are key focus areas.

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